With the world's highest inflation and the Zimbabwe dollar losing half its value overnight, President Robert Mugabe has predicted a better life for his people. Peta Thornycroft has more for VOA on Mr. Mugabe's address to parliament.

Zimbabwe President Robert Mugabe was in a jovial mood as he delivered his last state of the nation address before national elections due in March.

Both factions of the opposition Movement for Democratic Change attended, having called off their boycott of President Mugabe's parliamentary speeches. They say the gesture was meant as a "confidence building measure" during continuing political negotiations with the ruling Zanu PF party.

Mr. Mugabe described the negotiations, which begin their final stage Wednesday, as a landmark development. He said they marked "the dawn of a new era in constructive engagement across the political divide."

The talks, facilitated by South Africa, are due to end December 12. They are expected to produce a new constitution, a political agreement between the two parties, transitional arrangements, and already agreed upon new electoral laws.

Mr. Mugabe said Zimbabwe is a sovereign state and will invite only what he described as "friendly nations" to observe next year's national polls.

He said there had been what he called "a sinister campaign" by Britain to bar his attendance next week at the summit between the European Union and the African Union in Portugal. Because of continuing human-rights abuses and allegations of misrule, the EU has imposed restrictions on Zanu-PF leaders, including President Mugabe, on traveling to Europe.

President Mugabe said Zimbabwe's problems with Britain were a bilateral matter and should be resolved on a bilateral basis.

When he referred to what he called Zimbabwe's Marxist and Socialist roots, opposition legislators reacted by shouting at the ruling party's legislators, calling them "thieves." President Mugabe, whose address to the parliament was described by observers as relaxed, only smiled.

There are, however tough days ahead for Zimbabweans. Economists said the value of the Zimbabwe dollar lost half its value overnight on the black market, which is now the only market in Zimbabwe.

Essential goods, including food and fuel, are in critically short supply and inflation, which is the highest in the world, is no longer measurable according to the Central Statistical Office in Harare.